Expert: Jason Shear, Esq. - 10/3/2008

Question
Hi,
I'm self employeed, used my amex last year for business even though amex tells me I shouldn't have done that since it's a personal account. Anyhow, They
cut my line of credit (no reason), demanded more up front, then started charging me $3600.00 a month in interest and fees while lying to me about special programs with favorable terms. Finally got a plan but not what I was originally told or promised. Unfortunitely business is down and I'm about to default on my $4600 amex payment. I owe them 130K, I'm told if they sue me this amount could double or triple. Is this true? Can they force the sale of my house?
My business is still producing me a income and my other financial obligations are all perfect, credit score fine just my income has gone down dramaticly and see no way out since bankrupcy isn't a option since I want to stay in business. How do I fight? How long do I have till I get sued or get a lien on my house? The Amex agreement states they don't have to notify me before they sue for breech of terms is this true?
Please help, I've got a family to feed and I'm sure alot of people out thier will be finding themselves in this position soon if our economy continues to go down the drain.
Sincerely,
Rob

Answer
Robert:

Sorry to hear your business is not doing well.  Let me start with your first question.  Despite what might be in the contract in terms of late payments fees or other associated fees regarding default, the amount if they sue you will not be double or triple.  This pay now or the amount will double if you are sued is a collection technique to try to force payment now.  However, with that said, if you are sued, you must answer the lawsuit so that their attorney does not add illegal amounts of interest, costs or attorney fees.  If you are sued, you or your attorney must challenge every extra charge on top of the principle by requiring to see the contract that allows for such.  

In terms of the two questions pertaining to your home, yes, in NY and most states if a creditor gets a judgment against you they can put a lien on your home or any other real property you own.  They can not force the sale of your home, but the lien will have to be paid off before the property is ever sold.  You did not mention what state you are in, but in some circumstances and depending which state your property is in, you can "ride out" the judgement until the judgment expires by staying in your home as your primary residence.  

It is true they do not have to notify you if they are going to sue you.  They do, of course, have to notify you of the lawsuit.  As I stated above, if you are sued, do not ignore the lawsuit and make them claim every extra charge above the principle amount, specifically the agreement in the original credit card agreement that allows for that.  You ask how you fight.  Many times just by a consumer fighting the lawsuit can result in a better settlement for the consumer.  You mention a payment plan not being honored.  You need to write to the address for billing inquires, not the address for payments, and notify them of the dispute.  Keep all records off your disputes and agreements with them.

You mention you do not want to file bankruptcy since you want to stay in business.  Chapter 7 bankruptcy, which is straight liquidation, is what I think you are referring to.  Under Chapter 11 Bankruptcy you can propose a plan of reorganization to keep your business alive and pay creditors over time.  People in business or individuals can seek relief in Chapter 11.

Good luck, I hope this was helpful.  If you have any follow up questions please do not hesitate to write or call.

Jason Shear
NY Consumer Attorney
716-566-8988